Russia’s Rosatom is aiming to become the World’s largest supplier of Uranium in the coming years

The Russian nuclear giant Rosatom plans to become the world’s largest supplier of uranium in the coming years; the first step toward this goal took place through the recent signing of a new multi-million dollar contract for the sale of low-enriched uranium to the US and the unveiling of a plan to increase supplies to several EU countries and China.

A few days ago, Rosatom, through its subsidiary TENEX, one of the world’s largest traders of uranium fuel and fuel processing services, signed a contract with US energy companies to supply uranium on the local market.

Neither the name of the buyer nor the amount of the contract has been disclosed; however, according to some sources close to Rosatom, it could be in the range of $35-40 million. TENEX said the buyer is a company, belonging to the US Fuelco Group, which unites three US NPP operators, including Luminant, Ameren Missouri and Pacific Gas & Electric.

The new agreement became 14th in the Tenex portfolio and involves direct supplies of low-enriched uranium to the United States. The Russian company has already been operating in the US market for several years, accounting for more than 20% of total uranium supplies to the US. It has contracts to supply of uranium with more than 10 US energy companies and ranks first in the total exports of Russian uranium.

These supplies take place as part of the existing Russian-American HEU-LEU agreement stipulating that Russian would supply low-grade uranium, produced as the result of dilution of weapons-grade uranium by its natural analogue. The agreement also involves supplies of uranium priced below market level.

According to analysts, the technology to produce low-grade uranium remains unique, and no country in the world except Russia has it at its disposal.

{

Get our daily investorintel update

Email address is invalid

Thank you for joining InvestorIntel daily email updates!

}

So far, about 40% of U.S. nuclear power plants have been operating by relying on recycled Russian uranium, because the United States’s own capacities in this area are not as developed. Uranium enrichment technology in the United States has been lagging behind Russia. Until recently, the US did not have its own centrifuge enrichment capability, using only licensed technology, which cannot compete effectively against Russian counterparts.

In this regard, the US energy companies were forced to import uranium from abroad and in particular from Russia and TENEX for a value currently estimated at USD$5.5 billion.

However, in recent years, the U.S. has announced plans to catch up with Russia in this field, through the establishment of a number of enrichment enterprises, based on the EU technologies.

As for the TENEX agreement, the HEU-LEU Agreement will expire in 2013 and then, starting in 2014, Russia will begin to make commercial-only deliveries of uranium to the US such that their total volume will not exceed 20% of the total uranium supplies to the US.

At the same time the Russian government and Rosatom believe that the 20% quota is too small because, during the next several years, TENEX will be able to significantly increase uranium supplies to the US. In this regard, the Russian government plans to initiate negotiations with the US to raise quotas after 2014.

In the meantime, according to Vadim Mikerin, head of TENAM Corp., TENEX’s US subsidiary, the company plans to start signing a new package of contracts with the US energy companies, during the next several years , which will be designed to begin operating from 2020.

Apart from the plans to expand in the US, Rosatom and TENEX have planned to significantly increase uranium supplies to Sweden, neighboring Ukraine and some EU countries. According to Rosatom’s official representative, the EU market presents a problem of latent quota arrangements, which some EU countries have used to artificially restrict uranium supplies from Russia.

The company has already expanded in the Middle East through the signing of an agreement with the government of the UAE for the supply up to 50% of enriched uranium to be used in the country’s first nuclear power plant.

In the mid-term, the company has also not ruled out the possibility of expanding in China, which has a promising nuclear energy program. It is also considering other countries of the Asia Pacific region, strengthening its positions in order to become the world’s largest supplier of uranium.